2018
DOI: 10.2308/accr-52027
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Management Disclosures of Going Concern Uncertainties: The Case of Initial Public Offerings

Abstract: We study the information content and determinants associated with voluntary management disclosures of going concern (GC) uncertainties by IPO issuers. In terms of information content, we examine IPO price revision and initial return and find robust support that management GC disclosures are associated with downward revisions in the IPO offer price and, upon considering the mediating effects of the price revision, also associated with lower initial returns. In terms of determinants, and after controlling for ot… Show more

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Cited by 24 publications
(15 citation statements)
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“…We need to know more about the drivers that explain the valuations provided by investors with conflicting objectives 4.Theory transmigration •We need to understand whether and how theories used to interpret the effects of the drivers of valuations in certain financial milestones can be translated into other milestones •Property rights theory or contracting theory can be applied to business-angel deals, to understand how angel investors' bargaining power influences their negotiations with other prospective investors •Social identity theory can be used to investigate whether business angels and other underinvestigated investors (e.g., family offices and sovereign funds) face a trade-off between a desire for financial rewards and emotional willingness to remain with a venture, and how this trade-off affects valuations •Framing theory has been used in early-stage milestones to explain why direct information disclosure can have either a positive or negative effect on valuations depending on how insiders present their companies in terms of the positive or negative linguistic expressions or gestures used. Scholars can also investigate whether similar mechanisms are valid in later milestones (e.g., Bochkay et al, 2018;Howard et al, 2021 for IPOs)…”
Section: Corporationsmentioning
confidence: 99%
See 1 more Smart Citation
“…We need to know more about the drivers that explain the valuations provided by investors with conflicting objectives 4.Theory transmigration •We need to understand whether and how theories used to interpret the effects of the drivers of valuations in certain financial milestones can be translated into other milestones •Property rights theory or contracting theory can be applied to business-angel deals, to understand how angel investors' bargaining power influences their negotiations with other prospective investors •Social identity theory can be used to investigate whether business angels and other underinvestigated investors (e.g., family offices and sovereign funds) face a trade-off between a desire for financial rewards and emotional willingness to remain with a venture, and how this trade-off affects valuations •Framing theory has been used in early-stage milestones to explain why direct information disclosure can have either a positive or negative effect on valuations depending on how insiders present their companies in terms of the positive or negative linguistic expressions or gestures used. Scholars can also investigate whether similar mechanisms are valid in later milestones (e.g., Bochkay et al, 2018;Howard et al, 2021 for IPOs)…”
Section: Corporationsmentioning
confidence: 99%
“…For example, while filing for an IPO and preparing the necessary corporate governance documents, entrepreneurs tend to enhance good news with positive and easier-to-read writing (Howard et al, 2021), and camouflage bad news with more complex expressions, especially in periods of low scrutiny and low analyst coverage, with a consequent increase in IPO proceeds (Benson et al, 2015). On the contrary, going-concern disclosures in the financial reports of firms pursuing IPOs are associated with lower initial returns (Bochkay et al, 2018).…”
Section: Financial Informationmentioning
confidence: 99%
“…Bochkay, Chychyla, Sankaraguruswamy, and Willenborg (2018) report that in their pre-ASC 205-40 IPO setting, only 6.8% of sample firms had voluntarily disclosed an issue with going concern in the same year the auditor gave the firm a clean audit opinion. Additionally, they find that management going concern disclosures contain information that is used by investors.…”
mentioning
confidence: 99%
“…Thus, firms can manipulate their environmental disclosures as a form of impression management or greenwashing to construct a green corporate image (Du & Vieira, 2012; Parguel et al, 2011). Although there are regulatory, reputational, and litigation risks that may dissuade greenwashing (Berrone et al, 2017; Bochkay et al, 2018; SGX, 2018), environmental disclosures may be biased and overly optimistic (Meng et al, 2014; Siew, 2015).…”
Section: Theories and Hypothesesmentioning
confidence: 99%